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Obama charges China with unfair trade practices at WTO

The Obama Administration has launched a new trade enforcement action against the People’s Republic of China at the World Trade Organization (WTO) concerning excessive government support provided for Chinese production of rice, wheat, and corn. United States Trade Representative Michael Froman and United States Secretary of Agriculture Tom Vilsack were joined by bipartisan members of Congress in announcing the complaint which challenges China’s use of “market price support” for three key crops (rice, wheat, and corn) in excess of China’s commitments under WTO rules.

In 2015, China’s “market price support” for these products is estimated to be nearly $100 billion in excess of the levels China committed to during its accession. China’s excessive market price support for rice, wheat, and corn inflates Chinese prices above market levels, creating artificial government incentives for Chinese farmers to increase production. The United States is challenging China’s government support on behalf of American rice, wheat, and corn farmers to help reduce distortions for rice, wheat, and corn, and help American farmers to compete on a more level playing field.

“These programs distort Chinese prices, undercut American farmers, and clearly break the limits China committed to when they joined the WTO. As this Administration has consistently and repeatedly shown, we will not stand by when our trading partners fail to follow the rules like everyone else,” said Ambassador Froman. “We will aggressively pursue this challenge on behalf of American farmers and hold the Chinese government accountable to the standards of fair global trade.”

“Through tariff cuts and the removal of other trade barriers, China has gone from a $2-billion-a-year market for U.S. agricultural products to a $20-billion-plus market,” said Agriculture Secretary Vilsack. “But we could be doing much better, particularly if our grain exports could compete in China on a level playing field. Unfortunately, China’s price supports have encouraged wheat, corn and rice production in China that has displaced imports. When China joined the WTO, it committed to limit this kind of trade-distorting support, which it has failed to do. This has resulted in significant losses to American producers. We see substantial opportunities to meet import demand for grains in China if China is willing to operate a WTO-consistent trade regime.”

This trade enforcement action marks the 14th complaint brought by the Office of the United States Trade Representative (USTR) against China at the WTO since 2009. It demonstrates the Obama Administration’s ongoing commitment to ensuring China abides by its WTO obligations, and to strictly enforcing the trade agreements that protect the interests of American farmers, workers, and businesses. The Administration has taken, and will continue to take, all steps necessary to ensure American farmers, workers, and businesses can compete and win on a level playing field in the global economy.

“Eliminating barriers to trade, and gaining access to new markets is critical for our producers. But, those efforts will go without reward if the existing trade rules are not enforced,” said Senator Pat Roberts, Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry. “U.S. producers know the importance of sticking to their commitments, and they have experienced first-hand the harm caused to the agriculture industry by countries that don’t follow the rules.”

“In today’s global economy, we need to hold countries like China accountable for anti-competitive trade practices that hurt American farmers and businesses,” said Senator Debbie Stabenow, Raking Member of the Senate Committee on Agriculture, Nutrition, and Forestry. “I applaud U.S. Trade Representative Michael Froman and Secretary of Agriculture Tom Vilsack for working with the World Trade Organization to bring this case forward. We need to make sure that American farmers can compete on a level playing field and I will follow this case closely as we move forward.”

“Today’s enforcement actions highlight how we can use trade rules to America’s advantage. Robust enforcement of our trade agreements, including WTO rules, ensures that our farmers, businesses, and workers are treated fairly,” said House Ways and Means Chairman Kevin Brady. “As we move forward in Congress with other trade agreements, I will continue to work with USTR to ensure a level playing field for our workers and our products.”

“Not only does China refuse to abide by the commitments it made in joining the WTO, it attempts to obscure its illegal actions by consistently failing to even report on the support it is providing to its farmers,” said House Agriculture Committee Chairman K. Michael Conaway. “The actions of the Chinese government-and increasingly those of other advanced developing countries-are having a detrimental impact on America’s farmers and ranchers. While enforcement action is long past due, I applaud the Administration for taking action on behalf of our nation’s corn, rice, and wheat producers.”

“America’s farmers are ready and able to compete in a global marketplace but can’t do so without a level playing field,” said House Agriculture Committee Ranking Member Collin Peterson. “The United States has a responsibility to hold other countries accountable when they fail to honor their WTO commitments, resulting in lost opportunities for American farmers.”

“On top of challenging commodity prices, North Dakota farmers shouldn’t have to deal with China breaching trade commitments and making it tougher for us to get market value for our crops,” said Senator Heidi Heitkamp, member of the Senate Committee on Agriculture, Nutrition, and Forestry. “When countries cheat on trade agreements and distort global markets, we need to hold them accountable, and that’s what the U.S. Trade Representative and the Secretary of Agriculture are doing today. Addressing Chinese over-subsidization can help support the price of U.S. wheat and corn, and that’s good news for North Dakota farmers.”

“Today’s announcement is welcome news to the producers of the Third District of Nebraska who are willing and very able to compete internationally so long as the playing field is level,” said Congressman Adrian Smith, member of the House Ways and Means Trade Subcommittee and Chair of the Modern Agriculture Caucus. “America’s engagement and leadership in the WTO and trade agreements ensures we can hold our trading partners to the highest standards.”

Today’s action continues the Obama Administration’s strong record of enforcing the rights of the United States under our trade agreements. Since 2009, USTR has brought 23 enforcement actions (including this one) at the WTO. The United States has won every one of these disputes decided thus far. This reflects the Administration’s commitment to trade enforcement and indicates the resolve that the United States would bring to enforce the high standards won in the Trans-Pacific Partnership (TPP), ranging from market access for United States agriculture exports, labor and intellectual property rights, protection of the environment, and keeping the internet free and open.

Additional Background Information about the Complaint

According to USTR’s analysis, China appears to provide agricultural domestic support to Indica rice (long grain), Japonica rice (short and medium grain), wheat, and corn in excess of its Aggregate Measurement of Support (AMS) commitments under the WTO Agreement on Agriculture (Agriculture Agreement). China maintains this support through “market price support” programs. Pursuant to the market price support programs, China announces on an annual basis the minimum prices at which the government will purchase Indica rice, Japonica rice, wheat, and corn in major producing provinces during the harvest season. Through this program, China has maintained domestic prices at levels above world market levels since 2012, influencing domestic production decisions and distorting the Chinese market.

China Provides Domestic Support In Excess of its WTO Commitments

Product WTO Commitment 2012 2013 2014 2015
Wheat ≤ 8.5% Over Over Over Over
Indica Rice ≤ 8.5% Over Over Over Over
Japonica Rice ≤ 8.5% Over Over Over Over
Corn ≤ 8.5% Over Over Over Over

China appears to have breached its WTO Agriculture Agreement commitment not to provide support in favor of domestic producers in excess of the commitment levels provided in its WTO Schedule. China committed through its WTO Schedule not to provide trade-distorting domestic support, except for domestic support at or below a de minimis level of 8.5 percent for each agricultural product. China, however, has provided domestic support for each product – Indica rice, Japonica rice, wheat, and corn – substantially above the 8.5 percent de minimis level. In fact, in 2015, the level of support provided through these programs in excess of China’s commitment was nearly $100 billion.

Economic Impact of United States Rice, Wheat, and Corn Exports

America’s rice, wheat, and corn industries are vitally important to our national economy. Together, exports from these industries average $20 billion per year. These exports contribute an additional estimated $70 billion to the United States economy every year, and support 200,000 American jobs.

The Obama Administration’s Trade Enforcement Record

• Since President Obama was inaugurated in 2009, USTR has filed 23 enforcement complaints (including this one) at the World Trade Organization (WTO) – more than any other WTO Member. The United States has won every single one of those complaints that has been decided by the WTO so far.

• Obama Administration has brought 14 trade enforcement challenges against China, three against India, and several other complaints against a series of major economies including Indonesia, Argentina, the Philippines, and the European Union. To ensure the greatest economic benefits for American workers and exporters, the Obama Administration has used our trade enforcement actions to emphasize opening these large, strategic markets to which the United States exports a diverse array of products and services.

• The Obama Administration has also broken new ground on the enforcement of agricultural market access including cases against India’s non-science-based measures on poultry and other products allegedly to protect against avian influenza (U.S. prevailed in 2015), Indonesia’s import licensing regime on beef, poultry, and horticultural products (case pending), and China’s unfair taxes on U.S. broiler chicken products (U.S. prevailed in 2014; compliance challenge pending).

• Enforcement extends far beyond formal disputes. The Obama Administration has opened markets for American workers, farmers, and businesses by taking tough stands to resolve unwarranted trade barriers with trading partners. For example, we have eliminated BSE-related restrictions in 16 countries since January 2015, gaining additional market access for U.S. beef in Brazil, Colombia, Costa Rica, Egypt, Guatemala, Iraq, Lebanon, Macau, New Zealand, Peru, Philippines, Saint Lucia, Singapore, South Africa, Ukraine, and Vietnam. As a result, U.S. beef exports have recovered to pre-2003 levels. We also successfully engaged with the Philippines – including through the Special 301 process – to enhance protection of intellectual property rights. These and similar actions have helped expand exports and level the playing field for American goods and services.